8/21/2010

Why need foreign talent in finance?

Look at the three local banks that we have, big strong and financially sound. These banks were built, brick by brick, under conservative and traditional principles and practices of banking. They grow in a slow pace, under strict regulations and scrutiny.
Their conservative and traditional practices have lagged them behind the multinational American and European banks, the Citis, Goldmans, the Morgans, the Lloyds, Barclays and the UBS. These American and European banks grew rapidly during the period of liberalisation and deregulations. But then many grew big fast and quick and went pop fast and quick as well. In banking and finance, the hare and tortoise race is still applicable in many ways.
With the benefits of hindsight, the Americans and Europeans are trying to rein in the free wheeling days when high finance is nothing more than a casino and selling snake oils. Liberalisation and deregulation were what they demanded and what they got, and the whole system nearly collapsed with trillions lost across the world. The situation is best summed up by an article in the ST by Howard Davis, former Chairman of Britain’s Financial Services Authority and now director of the London School of Economics.
He quoted Andy Haldane from the Bank of England, …‘Only when markets were deregulated and liberalised from the early 1970s onwards did finance once again leap ahead…. He argues that much of the apparent growth in value added has in fact been illusory, based on increased leverage, excess trading and banks writing deep out of the money options, for example, credit default swaps, a US$60 trillion (S$80 trillion) market in 2007....What all these strategies had in common…was that they involved banks assuming risk in the hunt for yield – risk that was often disguised because it was parked in the tail of the return distribution.’
The era of fool’s gold may be over and America and Europe may not see its heyday sooner. But fear not, for if America and Europe ‘over constrain the finacial sector, risk may migrate outside the regulatory frontier, where it will be harder to measure and monitor.’
And this is where Singapore can step in. The rejects from the American and European financial industry are welcomed here to do their damages. Our local banks is in need of these foreign talents to spurt growth, to grow as big as Citibank, Lehmans, Goldmans, Morgans, the Bears and Stearns and the likes.
Shall we or shall we not welcome these foreign talents into our financial industry? They will bring growth and innovation and boost our productivity and bottom line practically overnight. We don’t have to wait a millenium to grow our local banks to super banks. They can be super banks with the foreign expertise and their innovative banking practices and writing off debts. Banks need to take risk, high risk, and operate like casinos if they want rapid growth and high yield.
With our greed for instant growth, like our infamous instant tree formula, we have no choice but to embrace these foreign talents with open arms.
PS. Below are the causes of the financial crisis listed in Wikipedia. You can actually tick those that are applicable and happening here to see the risk that we are exposed.
1 Background and causes(2007/8 financial crisis)
* 1.1 Growth of the housing bubble
* 1.2 Easy credit conditions
* 1.3 Sub-prime lending
* 1.4 Predatory lending
* 1.5 Deregulation
* 1.6 Increased debt burden or over-leveraging
* 1.7 Financial innovation and complexity
* 1.8 Incorrect pricing of risk
* 1.9 Boom and collapse of the shadow banking system
* 1.10 Commodities boom
* 1.11 Systemic crisis
* 1.12 Role of economic forecasting

Maybe the collapse of one bank results in tens or even thousands of millionaires ranging from the CEO of the bank, its' senior executives, the investors, punters of their financial products and members of the regulator fed with insider informations. Last but not least those with the means to manipulate the shares etc.

The Bank itself is not animate and incapable of greed, the people running it are not only capable, their desires for wealth will probably drive them to all kinds of schemes and sophistries.

Of course, like in Sin where every month, some become millionaires with Big Sweep, Toto and Casinos. BUT many with their families are also made to suffer because of gamblings.

It's just my superficial understandings, so do forgive me for any faux pas.

The game was up long ago. Even MAS has virtually abandoned all its old, conservative principles when it was just a small "agency" acting out of the Treasury offices.

There is no escape: the global reserve currency (USD) is itself is a bankrupt currency -- kept alive only because it is the reserve currency and therefore has a "monopolistic" demand (let's face it: for what other reason would there be a demand for a shit currency?)

And everyone elses' currency is floating relative to one another, "I'm fucked, so what so are you and you and you and everyone else".

Every country in the world is to some degree experiencing the likelihood for financial collapse because of the same reasons: printing too much money, and creating credit from credit.

The first part is the typical treatise on the unsound monetary system which we have. The second part (from pg 16 onwards)gives some detail about the market manipulation especially since the Clinton era - specifically manipulation of the bond and gold markets through the massive usage of derivatives.

In short, both the US government and the finance oligarchy had reasons to be chummy buddies. They have made it such that the interests of the finance sector is the same as that of the government, and today they have made it to be the same as the interests of the whole world.

In all my postings, one of my key principles is to avoid tarnishing anyone personally, and the least for indiscretion in their private live...

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